A 2-For-1 Stock Split

question 27

Multiple Choice

A 2-for-1 stock split:

• A)Is accounted for in the same way as a stock dividend.
• B)Increases the number of outstanding shares of common stock,but par value per share remains the same as before the split.
• C)Is recorded by transferring the par value of additional shares from retained earnings to the common stock account.
• D)Should logically cause the market price per share to drop by approximately 50%.

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Definitions:

Corporation

A legal entity that is separate and distinct from its owners, with rights to own property, incur debt, sue and be sued.

Ownership Right

A legal right that confers the possession of assets and the benefits that come from owning them.

Stockholder

An individual or entity that holds one or more shares of stock in a public or private corporation, thus owning a portion of the company.

Dividends

Payments made by a corporation to its shareholder members from the company's earnings.